While it is still early to quantify the potential impact of the Omicron variant of the coronavirus on businesses, stock markets globally have already witnessed a downturn. Till recently, most of the leading equity indices were trading around their record levels, but since the discovery of the new variant, which was reported to the World Health Organization (WHO) for the first time on November 24, pessimism seems to have seeped in.
Since the discovery of the new variant, Indian benchmarks Sensex and Nifty have lost 1.76 per cent and 1.87 per cent, respectively (till December 7). The negative impact has been equally visible in the developed economies, some of which have been forced to reimpose restrictions amidst an increase in the number of infections.
While the UK’s FTSE has gained a marginal 0.75 per cent since November 24, Dow Jones and S&P 500 of the US are down 1.64 per cent and 2.11 per cent, respectively, till December 7. Asian majors Hang Seng and Nikkei have fallen 2.71 per cent and 4.43 per cent, respectively. South Korea’s KOSPI has also fallen marginally.
In India, market experts are of the view that the benchmarks are still trading above key support levels, but any major fall over Omicron fears could lead to accentuated selling activity. Incidentally, the Omicron scare comes at a time when many domestic and global majors have already been highlighting the stretched valuations of Indian equities that make the rally look brittle. In a recent report, Credit Suisse stated that Indian equities are the most expensive in the Asia-Pacific region and most of the positives related to the potential economic recovery are already priced in. It further said that the year 2022 could see single-digit return from Indian equities.
In a nutshell, if the Omicron scare attains a bigger scale, then stock markets worldwide, including India, could see investor wealth getting eroded.
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